Retiring early in South Africa – the popular method with a big catch

 ·16 Jun 2024

The FIRE movement—financial independence, retire early—is becoming more popular for young people across the world, but it is unattainable for many in South Africa.

The programme calls for extreme savings and investments that allow people to retire earlier than a traditional pension plan would allow.

The strategy is said to be incredibly popular among Generation Z and young professionals and is extensively referenced on social media platforms, including Instagram, TikTok and Youtube.

The core FIRE premie is to save and invest a large portion of your income—usually 50% to 70%—so that you can stop working far earlier than the typical retirement age of 60 or 65.

The recommendation is to live frugally, save aggressively, and invest intelligently.

Sarah Nicholson from said that many young people are attracted to FIRE’s promise of freedom and flexibility.

Using data from Flux Trends, she said that Generation Z (those born between roughly 1997 and 2012) plan to retire, on average, at 52 years, while 27% want to retire at age 45 or younger.

However, these retirement goals are simply unattainable for many South Africans.

“Youth unemployment is extremely high. Those fortunate enough to have a job often subsist from month to month,” said Nicholson.

There’s very little money left in their budgets for saving, let alone building up a substantial investment fund.”

“Following the FIRE method is easier if you have a good education, a substantial salary, and no dependents.”

However, she said that the movement offers valuable lessons, with many people now questioning the traditional narrative of working in an office for decades and only then following their dreams.

“Even if you can’t retire in your 40s, you can use many of the FIRE ideas to design a better financial future for yourself and your family, giving you more lifestyle choices.”

Here are some FIRE movement tips that JustMoney gave to help manage your finances:

  • Boost your financial literacy: Learn more about money matters to make informed decisions about spending, saving, and investing. Read books, follow financial blogs, listen to podcasts, and engage with the FIRE community on social media.

  • Create a detailed budget: Track income and expenses meticulously. Understanding where your money goes is the first step in identifying where you can trim costs.

  • Save and invest aggressively: Save and invest a significant portion of your income. Automate your savings to ensure consistency.

  • Build an emergency fund: Ensure you have robust savings to cover unexpected bills. This safety net will prevent you from dipping into your investment portfolio prematurely.

  • Live below your means: Adopt a frugal lifestyle. This might include buying second-hand items, rarely eating out, doing your own home repairs and car maintenance, and sharing accommodation.

  • Maximise your income streams: Look for ways to boost your income through side hustles, freelancing, or skills training to obtain a higher-paying job.

  • Invest wisely: Focus on low-cost, diversified investment options. Consider a balanced portfolio that aligns with your risk tolerance and long-term goals.

  • Minimise your debt: Be cautious about taking on debt and pay off high-interest loans as quickly as possible.

  • Take care of your assets: Assess your risks and research appropriate insurance. Digital nomads, for example, require cover for their laptops and other IT equipment so they’ll experience minimal work interruption if items are stolen or lost.

  • Track and adjust: Review your financial plan regularly. Life circumstances and goals can change, so stay flexible and adapt.

  • Plan for healthcare: Healthcare costs can be significant, particularly if you retire early and lose employer-sponsored medical aid. Select a medical aid package and gap cover that suits your needs and budget.

“You may not be able to retire at 40, but a solid understanding of money matters will bring you closer to a lifestyle driven by choice rather than necessity,” says Nicholson.

Read: Perfect storm about to hit South Africans earning more than R15,000 a month

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